Unions blast state on plans for underfunded pensions

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Logo from the state AFL-CIO

Logo from the state AFL-CIO (Website)

Rick PearsonTribune reporter

A coalition of public employee unions issued a report today blasting state legislation to address their vastly underfunded pension systems and offering instead to make increased worker contributions if lawmakers raised $2 billion by ending tax benefits to corporations and imposing new taxes.

Appearing at the James R. Thompson Center, members of the We Are One coalition said plans backed by Gov. Pat Quinn and another proposal supported by a bipartisan group of lawmakers would violate the state constitution by reducing pension benefits already guaranteed to workers. They predicted such a change would be overturned by the courts.

Moreover, the group said the plan Quinn was advocating would “cause deep harm to working and retired state employees and teachers, negatively impact the Illinois economy and yet still not solve the state’s primary pension problem — the failure to regularly fund its annual required contributions.”

The unions said their offer to require state workers and teachers to pay 2 percent more toward their retirement was conditional upon the state making an “ironclad guarantee” in state law that government fund its pension obligations.

To help fund those obligations, the unions proposed eliminating several corporate tax benefits as well as imposing new taxes on auto trade-ins, satellite TV service and downloaded digital entertainment. The new funds also could be used to help offset cuts in other public social services, the group said.

The coalition, headed by the state AFL-CIO, said they want a pension summit with Quinn and legislative leaders on Jan. 9, when the new General Assembly is sworn in. Quinn has asked lawmakers to act before then.

Illinois has the nation’s most troubled state public employee pension system, with an unfunded liability of $95 billion.

Quinn has tried to bring public attention to the problem, notably through an online video featuring “Squeezy the Pension Python,” to demonstrate how the growing amount of tax dollars devoted to pensions threatens to overwhelm funding for education and other services.

Quinn has backed a Senate-passed proposal that would require state workers to forego an automatic compounded 3 percent cost of living increase in their pensions in exchange for accessing state subsidized health care.

Those keeping the cost of living increase would lose access to health care in retirement and have capped at the current level the salary upon which their pension is based.

“The legislation was designed to essentially coerce state employees into accepting a significant cut in cost of living adjustments,” the unions said, calling it a “no-win choice” for workers. “In effect, the Quinn plan is a political ploy, not a meaningful resolution of the funding challenges faced by the state’s pension systems.”

A more recent plan offered by a bipartisan group of lawmakers “also contains significant problems,” the unions said, including cuts in cost-of-living increases and increased retirement ages. “In the end, an unconstitutional pension change would be nullified by the court, and the legislature would have, once again, merely kicked the can down the road,” the group said.

Instead, the unions said their offer of increased employee contributions would generate about $350 million a year toward pensions.

At the same time, it proposed the end to more than $1.5 billion in tax exemptions, primarily that benefit corporate taxation.

It proposed repealing recent tax breaks for the Chicago Board Options Exchange, a tax break for for-profit hospitals, eliminating an increase in the size of estates subject to taxes and curbing spending on economic development incentives for business.

But the group also proposed a 5 percent tax on satellite TV service; requiring sales tax to be paid on the entire price of a new car rather than just the remaining balance after trade in; and imposing the sales tax on e-books, movies, music and games digitally downloaded to smart phones and other electronic devices.

The new car sales tax would raise an estimated $300 million, the group said, while the satellite tax would generate $75 million and the digital tax would bring in $10 million.

At the news conference, union officials said the pension issue was a “revenue problem” and required a revenue solution, not cuts in retirement benefits.

Union officials repeatedly noted the vast majority of those in the state pension systems do not receive Social Security and their state pension is their life savings.

Quinn offered a cautious response to the union pension proposal at an unrelated news conference today, saying “we want to work with the labor unions and the employee groups as far as we can, but ultimately the taxpayers come first and that's what we have to do."

Asked about the union’s demand for guaranteed funding for the pension program, the governor said he had sought to meet the state’s obligations to public employees but that the existing benefits structure must be changed.

“Unless we reform the structure of the pension system we will continue to see our investment in education, public health, public safety decline and that's not a good way to have a good state,” Quinn said. “So we need to act now for the common good.”